Agenda
Agenda
Anything New?
Relax….Janet is OK
Overview of Chapters 8-11
Intro to Chapter 8
HOMEWORK
Read Chapter 8 (Including the Last
Word)
Questions 3 (skip d)
Problems 2, 4 (don’t forget e and f on page 180)
anything new?
Overview of Chapters 8-11
Four Market (Industry) Structures
1.
Pure Competition
2.
3.
4.
Monopolistic Competition
Oligopoly
Monopoly
Overview of Chapters 8-11
Pure
Competition
Characteristics
Number of Sellers Many
Product
Differentiation
Barriers to
Entry / Exit
TOOLS
None
(commodity)
None
None Control of Price
GOAL
Elasticity* totally elastic
Monopolistic
Competition Oligopoly
Several Few
Some
Some
Some elastic
Monopoly
One
More ????
More
Significant
Total
Total inelastic
* La Salle BONUS!!!
totally inelastic
Characteristics
Demand Curve
Graph
Overview of Chapters 8-11
Pure
Competition
Monopolistic
Competition Oligopoly Monopoly
video http://www.youtube.com/watch?v=9Hxy-
TuX9fs
Three Minute Break
Chapter 8
A few facts about Pure Competition
MR = P = D = AR
Figure 8.1
MR = Marginal Revenue
P = Price
D = Demand
AR = Average Revenue
Chapter 8
An additional fact about Pure Competition
(and every other structure)
MR = MC
Very important…it’s money in the bank!
Chapter 8
A few facts about Pure Competition (and every other structure)
MR = MC
Very important…it’s money in the bank!
Chapter 8
MR = MC
Here’s how it works….
A firm will produce until MR = MC.
Why? Think about it.
Chapter 8
MR = MC
Figure 8.3
It’s easier than it looks
La Salle Bonus
Car buying…Do I buy or do I lease?
You are considering buying a car. The deal offers you a chance to lease the car* rather than buy it.
What do you do?
* A lease is a fixed term contract (perhaps 36 months) to own the car for that period of time. You pay the monthly lease payments then return the car at the end of the term
(36 months in this case).
La Salle Bonus
Car buying…Do I buy or do I lease?
http://audipasadena.rusnakonline.com/i ndex.htm
La Salle Bonus
Car buying…Do I buy or do I lease?
Facts…
$399 per month for 36 months to lease the car.
Spend $33,800 to buy the car.
You can borrow $25,000 at 6%*
Earn 8% on your investment
* http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx
La Salle Bonus
Car buying…Do I buy or do I lease?
What do you drive that 37 th month?
La Salle Bonus
Car buying…Do I buy or do I lease?
More Information… http://auto.howstuffworks.com/buying-selling/how-to-lease-a-car.htm
HOMEWORK
Read Chapter 8 (Including the Last
Word)
Questions 3 (skip d)
Problems 2, 4 (don’t forget e and f on page 180)
